The European crisis in the context of the history of previous financial crises

Michael Bordo and Harold James
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Michael Bordo: Rutgers University
Harold James: Princeton University

No 18, Special Conference Papers from Bank of Greece

Abstract: There are some striking similarities between the pre 1914 gold standard and EMU today. Both arrangements are based on fixed exchange rates, monetary and fiscal orthodoxy. Each regime gave easy access by financially underdeveloped peripheral countries to capital from the core countries. But the gold standard was a contingent rule—in the case of an emergency like a major war or a serious financial crisis --a country could temporarily devalue its currency. The EMU has no such safety valve. Capital flows in both regimes fueled asset price booms via the banking system ending in major crises in the peripheral countries. But not having the escape clause has meant that present day Greece and other peripheral European countries have suffered much greater economic harm than did Argentina in the Baring Crisis of 1890.

Keywords: Gold Standard; Gold Exchange Standard; Debt Crisis; Euro (search for similar items in EconPapers)
JEL-codes: F33 (search for similar items in EconPapers)
Pages: 33
Date: 2013-07
New Economics Papers: this item is included in nep-cba, nep-his, nep-hpe, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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